Daily Archives: Sep 28, 2011

What do you get if you mix record low unemployment, a booming economy, and above target inflation? The answer in Brazil’s case, it seems, is strikes.

Bank employees walked off the job on Tuesday, joining the country’s postal workers, who went on strike two weeks earlier. Read more

Airports, roads and railways may be the most visible elements of emerging market infrastructure investment. But they are all dwarfed by spending on electricity generation and transmission.

Electricity investment already counts for nearly half of EM infrastructure investment. And if a study published on Wednesday by Cambridge University and the Royal Bank of Scotland is correct, it will amount to around two-thirds of the total over the next 20 years. That’s a lot of power – and a lot of contracts. Read more

Britain and other developed economies are still paying a price for not giving sufficient attention to emerging markets, Vince Cable, UK Business Secretary, has said.

Speaking to the FT on a trade and investment promotion trip to Turkey, Cable argued that such neglect was particularly costly, since trade with emerging economies offered a possible growth route at a time when both the US and the eurozone are struggling. Read more

Another day, another serious allegation against an Indian corporate. DVCS Varma a general manager at Essar Steel, controlled by the Essar Group, has been arrested on allegations that the company paid protection money to Maoist guerillas.

Essar denied the allegations, which follow months of claims about the involvement of Indian companies in a telecoms licence scandal.   But, the affair will do little to improve the tarnished image of Indian business. Shares in Essar Oil fell 3.9 per cent on Wednesday, and shares of London-liste Essar Energy tumbled 4.2 per cent. Read more

gavelA bit of good news this week for Hungary’s hard-pressed banks, as they struggle with a new law that will force them to share the burden of their mortgage clients’ foreign exchange losses.

The Supreme Court on Tuesday overturned a lower court ruling that had declared it illegal for a savings bank to raise interest charges in response to higher financing costs. While the wider scope of the judgement isn’t clear, the banks claimed it as a victory. It suggests that the courts might give the banks a decent hearing when they bring their case against the fx mortgages law. Read more

Need further proof that consumer-goods companies are serious about cracking emerging markets? Then look no further than Nestlé’s latest recruit.

Wan Ling Martello – currently head of Walmart’s e-commerce business in emerging markets – is to succeed Jim Singh as chief financial officer when the latter retires next year, the Swiss-food group said late on Tuesday.

The appointment of Martello, a company outsider and a relative unknown, took analysts by surprise. But with Nestlé now deriving more than a third of its sales from EM countries, the company clearly sees Martello – who speaks Mandarin, Hokkien Chinese and Tagalog – as an asset to the team. The question though is – can she deliver? Read more

Anton Siluanov, acting finance minister, Russia sept 2011, Bloomberg If the Kremlin was looking to calm investors after the abrupt exit of Alexei Kudrin as finance minister, it could have done much worse than Anton Siluanov, a second-generation finance ministry official who will be serving as Kudrin’s interim replacement.

While the staid Siluanov is unlikely to stand in Kudrin’s shoes for long, he will at least provide an initial guise of stability for market participants who initially worried that Kudrin’s departure meant the end of Russia’s pragmatic, fisically conservative spending policies. Read more

Another sign of Turkey’s increasing international significance: Erdem Basci, central bank governor, said on Wednesday the country was in “advanced” talks with China over a currency swap agreement, Bloomberg reports.

Yet the deal is also a sign of Turkey’s weakness and vulnerability. Read more

Claims from Anonymous, the amorphous cyber-collective, of fraud at Chaoda Modern Agriculture, a scandal-hit Chinese vegetable producer, on Wednesday revived the argument about transparency in emerging markets companies.

The activists’ report, which prompted the Hong Kong authorities to start an investigation into Chaoda and suspend its shares, comes hot on the heels  of regulatory probes into Hong Kong-listed China Forestry and Toronto-quoted Sino-Forest.  It’s enough to prompt a close look at EM earnings quality.  And right on cue comes Morgan Stanley. Read more

Zhang Xin, one of China’s most powerful real estate developers, says the governments of large cities like Beijing and Shanghai are so sensitive to public opinion these days that property barons like her can no longer turf people out of their homes to build skyscrapers. What is the world coming to? Read more

The old adage was that when America slowed down, the world economy came to a grinding halt. The current version of that is the eurozone debt crisis could spark another global downturn. And China? Surely it too will be pulled into the economic quagmire, given its role as the world’s manufacturer?

Perhaps not. According to a note published by HSBC on Wednesday, net exports made almost zero contribution to China’s 9.6 per cent GDP growth in the first half of 2011. Rather than moving in time with the rest of the world, China may be marching to its own beat. Read more

* Cairn within reach of Indian sale

* Anadarko sounds out Brazil buyers

* Moscow moves to calm investors Read more

Maarten Jan Bakkum. INGBy Maarten-Jan Bakkum of  ING Investment Management

The sharp correction in Russian equities of the past few weeks is nothing unique. Based on the experiences of recent years, there are few stock markets that are riskier than Russia’s.

After Brazil and South Africa,  the Russian market has been the most sensitive to increasing risk aversion among investors since the market correction of 2008. And given the rapidly deteriorating outlook for world economic growth and increasing fears that the European debt crisis will worsen, a further correction in equities is likely. At first sight, then, Russia does not appear to be an obvious investment opportunity. But things aren’t necessarily what they seem. Read more

A note from Demetrios Efstathiou and Roderick Ngotho of RBS on Tuesday evening makes the obvious point that “In a sell-off, positioning is all that matters and ‘crowded’ trades get hurt the most”.

What’s illuminating is the figures they have put together, matching end of August country allocations by real money accounts, based on data from EPFR, the fund-flow watcher, with figures compiled by RBS showing the sell-off in those countries’ currencies in September. The correlation is unmissable (see chart after the break). Read more

With a deepening global economic crisis, stubbornly high inflation and slowing growth to worry about, it is hard to imagine that Zhou Xiaochuan finds much comfort in accolades from the media.

Nevertheless, Euromoney’s selection of Zhou as the world’s best central bank governor in 2011 is a well-deserved recognition of monetary policy decisions that have guided China along the ever-elusive course between supporting growth and taming inflation, a tightrope act made all the trickier by the horrid external environment. Read more

Wednesday’s top picks from the beyondbrics team: Lex discusses the renminbi’s future and why investors should be concerned about Kudrin’s departure, while elsewhere Brazil’s travails and Taiwan’s newest presidential candidate are given the once over. Read more

Tuesday’s brief rally ran out of steam on Wednesday as Asian stocks mostly lost ground, with investors worried again that the European debt crisis was still a long way from being solved.

The Hang Seng was down 0.9 per cent at midday before recovering somewhat in the afternoon and, as Bloomberg reported, is set to record its biggest monthly fall in almost three years. Read more

The lives of millions of ordinary Indians have been transformed by the rise of wireless telephony, says James Fontanella-Khan in this FT video. View after the jump. Read more

* Cairn within reach of Indian sale

* Anadarko sounds out Brazil buyers

* Moscow moves to calm investors Read more